The authors asked asset allocators to rate venture capital funds based on their evaluation of a 1-page summary of the fund’s performance history, in which they manipulated the race of the managing partner (White or Black) and the strength of the fund’s credentials (stronger or weaker). Asset allocators favored the White-led, racially homogenous team when credentials were stronger, but the Black-led, racially diverse team when credentials were weaker. Moreover, asset allocators’ judgments of the team’s competence were more strongly correlated with predictions about future performance (e.g., money raised) for racially homogenous teams than for racially diverse teams. Despite the apparent preference for racially diverse teams at weaker performance levels, asset allocators did not express a high likelihood of investing in these teams. These results suggest first that the underrepresentation of people of color in the realm of investing is not only a pipeline problem, and second, that funds led by people of color might paradoxically face the most barriers to advancement after they have established themselves as strong performers.
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